RBI Notification

Steps Taken by RBI to Develop Fintech


With the rapid change in technology and customer expectations, the regulatory authorities are constantly taking steps to recognize the changes that are taking place. To look into the matters on the important aspects of Fintech and its implications, RBI has set up an inter-regulatory Working group to review the regulatory framework and to look into the dynamics of the increasing growth of the Fintech scenario.

Further, for live testing of innovative products in the areas of retail payment and wealth management, RBI has permitted the institutions and banks to set up Regulatory Sandbox. i.e. reviewing the new products or services in a regulatory environment for which regulatory authority may /or may not permit certain relaxations. To collect evidence on the benefits and risks of new financial innovations, the Regulatory Sandbox permits the regulatory authorities, financial service providers and customers to conduct field tests, while carefully monitoring and considering their risks.

Major steps were taken by the RBI to develop Fintech

For developing the Fintech in the Indian Market, RBI has introduced the “Unified Payment Interface” in collaboration with NPCL (National Payments Corporation of India). NPCL was structured with guidance from RBI and IBA (Indian Banking Association). The introduction of UPI played an impulse role in the Fintech penetration and financial inclusion in the country.

What is UPI?

The Unified Payment Interface facilitates the user to access their bank account through an application on their smartphone or any other smart device. The UPI enables the seamless transaction of digital payments in India using a single channel of authorization for both banks and consumers.

The volume of UPI transactions has increased at a CAGR of 246 percent during the period from 2016-17 to 2018-19.

What is NPCL?

An initiative is taken by Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) for operating retail payments and settlement systems in India, under the provisions of the Payment and Settlement Systems Act, 2007 termed as National Payments Corporation of India (NPCI)with the main motive of creating a robust Payment & Settlement Infrastructure in India.

NPCI has been incorporated as a not-for-profit company under the provisions of Section 8 of Companies Act 2013, NPCI has been set up with the intention-

  • Providing Infrastructure facility to the banking sector in India for both physical as well as electronic payment and settlement systems.
  • Preferring innovations in the retail payment systems through the use of new technology for achieving greater efficiency in operations and strengthen the reach of payment systems.
NOTE: The RBI also released the consultation paper as a roadmap for regulating the P2P lending market in India. The document states the favorable outlook of the regulatory board for Fintech entities in the P2P segment in India. Further, the apex body issued 11 payment banks option in the year 2018 to support the objective of financial inclusion by utilizing the technological advancement of Fintech entities. Further,to improve the regulatory sphere, RBI is proactively trying to engage with fintech businesses and are also working towards creating a fintech ecosystem that is advantageous for both the market and the consumers.

Bharat Bill Payment System

For enhancing the payment structure in India, the Reserve Bank of India has introduced the Bharat Bill Payment System. RBI has 33 entities for Bharat pay operating unit under the BharatPay Payment System to establish an integrated bill payment service platform in India. In India, Bharat Bill Payment System is a unified bill payment system which offers to the customers an accessible bill payment system through various modes-

  • A network of agents,
  • By enabling various payment modes and providing instant payment confirmation.
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Reasons for Bharat Bill Payment System

In India, there was a need for a centralized bill payment system having a PAN India presence. This need led to the development of the Bharat Bill payment system by Reserve Bank of India. Bharat Bill payment system has provided various modes for making instant payment through-

  • Interoperability
  • Accessibility
  • Standardization
  • Cost-effective
  • Management of dispute
  • Brand Connect

Furthermore, few initiatives have been taken by the government to provide a strong infrastructure for fin-tech companies. To tackle the issues related to cybersecurity, the Government has also released a report of the working group for setting up a computer emergency response team in the financial sector.


By recognizing the need for new technologies and innovations, RBI and the regulatory authorities are very observant in creating the Fintech ecosystem. Taking into consideration various discussions with the government and various industry participants, Reserve Bank of India has released the peer to peer lending directions. The framework established by the RBI has enabled the innovations in the Financial technology which has provided a platform to the Fintech to test their applications in a flexible manner in front of their customers.

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